A Hanford Site subcontractor has agreed to pay $2 million to resolve allegations it violated the False Claims Act in connection with small business subcontracts, the Department of Justice announced Thursday. Federal Engineers & Constructors (FE&C) of Richland has long maintained it did nothing improper and admitted no liability in the settlement agreement.
The settlement agreement applies only to FE&C, and does not resolve a lawsuit that accuses additional parties of violations of the False Claims Act. The Department of Justice is continuing to pursue its case over subcontracting arrangements filed against Washington Closure Hanford, which until a year ago was the cleanup prime for Hanford’s River Corridor; Sage Tec, a small woman-owned business; and Laura Shikashio, the owner of Sage Tec. All deny liability.
Another small, woman-owned business doing work at Hanford, Savage Logistics, filed a whistleblower lawsuit in 2010, alleging violations of the False Claims Act relating to Washington Closure’s subcontracting to disadvantaged small businesses. The Department of Justice joined the lawsuit on some of its claims in 2013, including that FE&C, which was not a small disadvantaged business, used Sage Tec as a front company to get Hanford work. Washington Closure’s Department of Energy contract required it to subcontract some of its work to disadvantaged small businesses, such as women-owned companies.
“The false statements in this case were intended to deceive the government into believing that a woman-owned small, disadvantaged business was performing valuable work as a government subcontractor,” said Hannibal “Mike” Ware, the Small Business Administration’s acting inspector general.
Prosecutors alleged that Washington Closure issued two subcontracts to Sage Tec, knowing most of the work would actually be done by FE&C.
In 2010, Washington Closure awarded a subcontract worth more than $4 million to Sage Tec, a company formed by Shikashio, who the lawsuit said was the wife of an FE&C vice president. The subcontract included digging 85 feet deep to remove chromium contamination near the Columbia River. The lawsuit claimed Sage Tec had no experience and no equipment and that Shikashio was its only employee when the subcontract was awarded. The work was performed by FE&C employees, DOJ lawyers said.
In 2012, Sage Tec received a $15 million subcontract from Washington Closure for environmental cleanup in the Hanford 300 Area. Sage Tec still had only a single employee and no equipment, the lawsuit claimed.
“Small business fraud not only harms the taxpayers and the vital cleanup mission at Hanford, but legitimate small, disadvantaged businesses that do not have the opportunity to fairly compete for and perform subcontracts,” said Joseph Harrington, the acting U.S. attorney for the Eastern Washington District.
Savage Logistics and owner Salina Savage will receive about $470,000 of the $2 million settlement under the False Claims Act, which allows those who bring issues to the attention of the federal government to receive a portion of the money from settlements. FE&C also agreed to pay $100,000 to Savage Logistics and its owner for legal costs and attorney fees.
The remaining lawsuit against Washington Closure and Sage Tec is set for trial Feb. 12, 2018, in federal court in Richland, Wash. Last month, U.S. District Judge Salvador Mendoza Jr. ruled against a Washington Closure motion for partial summary judgment. Washington Closure had sought to have most of the damages the Department of Justice is seeking dismissed.
